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Coffee Talk (Tampa edition)
Is it bankers' turn?
A new accounting problem at SunTrust Banks Inc. may have implications for other financial institutions, particularly those owned by public holding companies.
The Atlanta bank, the nation's seventh-largest with an 11% share of the Florida market by deposits, placed Chief Credit Officer Sandra Jansky and Controller Jorge Arrieta on paid leave Oct. 11, pending an internal review.
SunTrust says it found that finance executives socked away $30 million too much into loan-loss reserves during the first two quarters of the year.
The discovery suggests SunTrust may be fiddling with reserve accounts in order to smooth out quarterly earnings. Similar problems at mortgage purchaser Fannie Mae and other companies usually prompt a restatement of financial results. SunTrust says it will do just that.
Richard X. Bove, a Tampa Bay area-based bank analyst for Punk Ziegel & Co., says federal securities regulators are apt to join the SunTrust inquiry.
Six years ago, a Securities and Exchange Commission probe forced a SunTrust restatement that lowered reserves by $100 million. Bove recalls SunTrust's profit growth suddenly ebbed after that.
This time around, Bove doesn't think the SEC is going to stop with SunTrust. "For a number of quarters now we have argued that banks are using financial engineering to report higher results," Bove says in a recent report titled "Managing Earnings."
Besides overstating reserves so the stored cash can be released later to prop up earnings, Bove says he sees some banks borrowing heavily in wholesale markets to buy instruments that can give a quick boost to net interest income. The banks only sell the winning investments that inflate earnings while keeping the losers on their books.
"These techniques have allowed banks to report record earnings quarter after quarter when in fact their core businesses have been lagging," Bove writes.
Intellectual expert
Earlier this summer, Carlton Fields attorney Andrew Greenberg testified before the U.S. Senate Judiciary Committee about the need for more balance in federal copyright laws. The committee sought the Tampa attorney's knowledge about intellectual property law.
Prior to that, the Institute of Electrical and Electronics Engineers (IEEE) recognized Greenberg for his contributions in the area of intellectual property law. The IEEE specifically singled out his work in an amicus curiae brief that apparently tilted the U.S. Supreme Court's decision in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd. (122 S. Ct. 1831).
Those credentials have now earned Greenberg an appointment by the American Law Institute as an adviser to its project, "Principles of the Law of Software Contracts." The project seeks to provide the courts with reasoned analysis and assistance with this relatively new area of intellectual property law.
'Negligent misstatement'
Elizabeth Rice exudes a confidence and likeability that earned her the prestigious title of president of the Florida Bar's Young Lawyers Division. Many of those who know her admire the intellectual precision she puts into her job as a commercial litigator. But Liz, as friends call her, committed a faux pas in her bid to become the next Hillsborough County judge.
The Hillsborough County Judicial Campaign Practices Committee declared Rice issued a "misleading and therefore inappropriate" campaign mail piece. Even so, the committee members said she did not violate any law.
Rice's opponent, Henry A. Gill Jr., filed the complaint on Sept. 30 over the content in the campaign ad as the two await a showdown at the Nov. 2 general election. He cried foul over a statement: "Our community leaders and Hillsborough County Bar Association members agree Liz Rice is the BEST choice for county court judge, group 11."
The committee ruled the language does not meet an actual malice standard as required by Cannon 7 of the Code of Judicial Conduct. "It appears much more likely to fall under the category of negligent misstatements," the committed declared.
It's uncertain whether Rice's "negligent misstatements" benefit Gill, considering he barely qualified at the Aug. 31 primary for a runoff election. Rice earned 48.45% of the vote, which is just 1.55% short of the 50% majority she needed to win the seat. Gill earned 25.95% of the vote. The two bested Brad Souders, who earned 25.60%.
Soft landing
The Sarasota-Bradenton International Airport has seen better days.
As airlines show a stronger preference for touching down at the Fort Myers and Tampa airports, passenger counts have steadily descended in Sarasota. Barely a million passengers came through the terminal last year, a decline of 5% over 2002 that continued a decade-long trend.
But things are looking up for the airport and especially for its president and chief executive, Fred Piccolo.
Earlier this month, Orlando discounter AirTran Airways Inc. announced that it was inaugurating daily service from Sarasota to Atlanta and to Baltimore. The non-stop flights start in December.
The Sarasota-Manatee Airport Authority, the agency that operates the county-line airfield, may have gotten carried away with the news from AirTran after years of commercial service contraction.
The authority rewarded Piccolo with a new contract that contains 4.25% annual raises for the next five years. On top of that, authority members are dipping into airport coffers to lavish up to $765,000 on a new house in the area for Piccolo, who currently commutes to work from Clearwater.
The new Piccolo contract calls for the authority to pick up not only his mortgage payments but his real estate taxes, lawn service and most of his utility bills.
Those kind of numbers got Coffee Talk to thinking: Is Piccolo grossly underpaid now? That doesn't appear to be the case.
Piccolo makes $156,613 a year at present. Not bad, considering Robert M. Ball, executive director of the Southwest Florida International Airport, takes down $183,825 annually. The Fort Myers airport greets almost six times as many passengers as the Sarasota airport.
Both men have been in their jobs for about the same amount of time, Piccolo since 1995 and Ball since 1996.
Ronald "Noah" Lagos, executive director of the St. Petersburg-Clearwater International Airport, has a ways to go to catch up to his Sarasota and Fort Myers counterparts. Lagos, who used to be Piccolo's chief operating officer in Sarasota, makes an annual salary of $122,847.
After a brief stopover as a transportation official in Fresno, Lagos started in Clearwater just this year. But his airport handled only about 65,000 fewer passengers than Piccolo's airport in 2003.
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